Gary Matthews and business partner sue Peoria, blame city for Pere Marquette's failure

Andy Kravetz of the Journal Star @andykravetz

Tuesday

Mar 12, 2019 at 3:00 PMMar 12, 2019 at 11:36 PM

PEORIA — The former developers of the Hotel Pere Marquette say in a lawsuit that it was the actions of city officials — not themselves — that led to a financial debacle that could cost taxpayers millions.

Gary Matthews and Monte Brannan's suit, filed last Thursday in Peoria County Circuit Court, alleges City Hall — specifically City Manager Patrick Urich and Mayor Jim Ardis — worked against them to the detriment of the hotel and to the taxpayers. Because of Urich's and Ardis' actions, they claim, the hotel went into foreclosure, the developers were forced out and lost millions. Taxpayers are now on the hook for some $7 million, the suit claims.

Christopher Ryan, who represents Matthews and Brannan, said it didn't have to be this way.

"The city has been spending years saying (the hotel) was mismanaged by Gary Matthews and Monte Brannan and that it was all their fault when, in fact, there were multiple ways to fix this, to reduce costs and to refinance," the attorney said. "And in every case, the city blocked it. We think there were some ulterior motives."

The suit seeks to recover $9 million Matthews and Brannan they lost when the deal soured. Additionally, the suit seeks to recover for each man $1.4 million, or roughly 5 percent of what the hotel was worth at the time. That was part of the agreement reached between the city and the developers.

Matthews and his partners have battled the city over finances for a hotel project that included more than $30 million in city-backed bonds to finance the development of the hotel properties and a multimillion-dollar loan to the developers. Matthews and Brannan have been grappling with financial issues with the properties in recent years, including an effort in 2016-17 to refinance their debt on the properties.

In their suit, the developers claim the city's actions along the way hindered those efforts.

Another bankruptcy filing from last year indicated that the city reached a side agreement with Brannan and Matthews in 2014, saying they’d work with the developers if the two agreed to forgo any compensation in the meantime. The idea was to keep the hotels functioning, to pay off debt and back property taxes and to find a way to get out of the financial sink hole.

Apparently, that didn’t happen, the city alleged. But in their suit, Matthews and Brannan say they didn't get a dime of their fees and did what they could despite the conduct of those inside City Hall. It was the city, not Matthews and Brannan, the developers claim whose actions ultimately led to the suit.

In last year's bankruptcy case, the city called for $8.3 million from Matthews and his partners, an amount that would cover the city’s loan losses in the recent sale of the hotel complex to INDURE Build-to-Core Fund for $38 million, a price that Matthews referred to at the time as “a paltry sum.” In his filing, Matthews stated that the hotels had a fair market value of $70 million to $100 million at the time of the attempted refinancing.

Both Urich and Ardis flatly dismissed the latest allegations, charging that the Matthews company mismanaged the hotel properties and failed to pay bills that led to foreclosure and bankruptcy proceedings.

"This complaint is baseless and is wholly lacking in merit. The city and the mayor will avail themselves of all appropriate legal remedies," the city manager said.

Ardis was stronger in his rebuttal.

"Mr. Matthews is desperate. At the end of this I believe he will get what he deserves," the mayor said.

Andy Kravetz can be reached at 686-3283 or akravetz@pjstar.com. Follow him on Twitter @andykravetz. Steve Tarter contributed to this story.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.